How Do You Spell Bifurcation? D-O-W-&-N-A-S-D-A-Q

In case you stepped away for a while -- or a few weeks or months perhaps-- the divided market is still intact.

Major Indices INDEX CHANGE % VALUE Dow 112.31 -1.1% 9980.32 S&P 500 7.15 -0.5% 1346.28 Nasdaq 25.57 +0.6% 4643.22 Russell 2000 6.70 +1.2% 560.74 TSC Internet 0.68 -0.1% 1183.88 NOTE CHANGE PRICE YIELD 10-Year Treasury 3/32 100 28/32 6.379%

Amid lunch hour on Wall Street, major stock proxies were turning in a mixed performance, with the Dow Jones Industrial Average bumping above and below the 10,000 level but consistently lower on the session. Not surprisingly, the Nasdaq Composite Index and the Russell 2000 were both in positive territory.

John Hughes, technical analyst at Shields, pointed out today's action is not that different from that of the last few weeks and "really since the year began," where "you have technology and everything else." The market's been seeing value money managers faced with redemptions, forcing them to sell their holdings, which are already depressed. And the money coming out of value is going into tech where money managers then buy the market's winners, he said. Hughes likened it to pouring water from one glass into another.

Not providing a lot of help to the market was this morning's revised fourth-quarter gross domestic product report. The fourth-quarter rate of GDP was revised upward to 6.9% from an original 5.8%. The revision was due to stronger-than-expected government and consumer spending, as well as higher exports in the December trade figures. It is the strongest rate of GDP since the second quarter of 1996. Economists were looking for a 6.4% rate, according to a Reuters poll. That growth rate is not the stuff that makes lower interest rates.

On the plus side, the report's inflationary component, the implicit price deflator, was unchanged at 2%, good news for stocks and bonds. Economists were expecting a 2.2% deflator, according to the Reuters poll.

As for the Dow, well, it can't catch a break. The blue-chip average was off 112, or 1.1%, to 9980. Weighing on the Dow the most were General Electric (GE), IBM (IBM) and 3M (MMM).

The Dow held in above 10,000 for a good portion of the morning. However, around 11:20 a.m. EST, the Dow took a big tumble and slumped below 10K. It has since bounced above and below that level.

Elsewhere, the S&P 500 was down 7, or 0.5%, to 1346.

The Nasdaq Comp was up 26, or 0.6%, to 4643. The Comp closed yesterday at an all-time high, its second in a row and the 11th record close of the year. The Nasdaq 100 was off slightly.

Hughes said he "wouldn't be surprised" to see the Comp go to 5000. He said the move there might be gradual. But he said he'd be careful of an exhaustive move up, like a four, five-day push of euphoria. He said if that was a scenario that unfolded, that would concern him.

Elsewhere, the small-cap Russell 2000 was up 7, or 1.2%, to 561.

The market's divergence between technology, telecom and biotech stocks and everything else has more than a few people concerned.

"I think this market is just sort of spooky," said Peter Coolidge, managing director of equity trading at Brean Murray Foster Securities. He said the bifurcation in the market "doesn't instill confidence."

The divergence has investors and traders wondering how it will end, he said, noting that the gap is continuing today. The trader said it's a case where people are selling the losers and buying the winners, having a piling-on effect, and exacerbating moves in both directions.

"It's really disconcerting," he said. "These gyrations don't instill confidence. It's a crazy kind of market."

TheStreet.com Internet Sector index was down 1, or 0.1%, to 1184. eBay (EBAY) and RealNetworks (RNWK) were prime drags on the DOT.

Sectorwise, banks and oil stocks were showing a bit of strength as were biotech issues. The Philadelphia Stock Exchange/KBW Bank Index was up 0.8%, as was the Chicago Board Options Exchange Oil Index. The Nasdaq Biotechnology Index was up 2.2%.

In the Treasury market, the 10-year Treasury note was down 3/32 to 100 28/32 to yield 6.38%. The 30-year Treasury bond was down 21/32 to 100 28/32, yielding 6.19%. (For more on Treasuries, see TSC's oft-updated Bond Focus column.)

Among other indices, the Dow Jones Utility Average was down 0.9%; the Dow Jones Transportation Average was down 0.2%; and the American Stock Exchange Composite Index was up 1%.

Market Internals

New York Stock Exchange: 1,295 advancers, 1,527 decliners, 640 million shares. 40 new 52-week highs, 149 new lows.

Nasdaq Stock Market: 2,014 advancers, 1,971 decliners, 1.1 billion shares. 278 new highs, 79 new lows.

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For a look at stocks in the midsession news, see Midday Movers, published separately.

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